By George Ward
The banking giant recently conducted its first live transaction on the Ethereum Layer 2 blockchain as an element of Project Guardian, a Monetary Authority of Singapore (MAS)-supervised initiative. JP Morgan completed the transactions that involved the use of DeFi alongside tokenized deposits and verifiable credentials.
According to the bank’s Head of Blockchain Projects, Ty Lobban, JPMorgan finished the transaction on the Ethereum L2 network Polygon due to its low fees and AAVE-compatible protocols’ permission pool concept.
Lobban added that the bank also provided tokenized currency, the Singapore Dollar (TSD) deposited for Japan’s Yen. TSD is designed as a native deposit coin with a stable value for on-chain transactions without the stablecoin’s scalability troubles.
In addition, JPMorgan also utilized the W3C Verifiable Credentials (VC) to access the Aave protocol and create VCs’ on-chain authentication. For the on-chain verification, Lobban noted that it provides “composability to identity.”
He added that verification is critical and can be used across multiple DeFi protocols. Moreover, JPMorgan also developed an institutional wallet to prevent traders from accessing the company’s funds.
Investors can only process trades within the approved DeFi platforms, each having its VCs. Investors are likely to have a last-minute change of heart, so the bank intends to ensure no withdrawal happens until the maturity date has approached.
JPMorgan is among the traditional financial heavyweights that appear bullish on the prospects of crypto assets and their use in transactions. The bank has already churned out several crypto-related services to meet the demands of its customers for digital asset investment products.
Introducing Project Guardian
Project Guardian is an initiative of Singapore’s central bank in partnership with other financial services firms like JPMorgan, DBS Bank Ltd., and Marketnode. The project’s main aim is to explore the use cases of tokenized assets and DeFi.
At the program’s pilot phase, JPMorgan, DBS Bank, and SBI Digital Assets Holdings carried out foreign currency exchange and government bond trading. Participants did the transactions against liquidity pools involving tokenized national fiat currencies.
Such currencies include the Singapore Dollar, the Japanese Yen, and Singapore and Japanese government bonds. In addition, all participants completed a series of cross-currency transactions and a simulated trade of tokenized bonds.
MAS seeks to use the project to assess the potential of asset tokenization. As a result, Project Guardian is a collaboration between the regulator and key players in the financial sector, who will act as the trust anchors.
Despite its previous strict stance against cryptocurrency, which led to the outflow of service providers to other countries, Singapore appears to be relaxing its rules.
The country was one of the first to develop comprehensive crypto and blockchain guidelines. It also has a licensing process for companies looking to set up shops in Singapore.
However, the accompanying frustrations with the regulations have led to firms leaving the country. In the meantime, Singapore appears to be back on track to become the world’s leading crypto hub.